Everything You Need to Know about Side Hustles and Tax

side hustle tax
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side hustle tax

For many of us, the idea of making an additional income on the side of our regular job sounds amazing. But many people are put off doing so due to the tax implications – or actually, not fully understanding what does and doesn’t need to be declared.

You might be worried about it not being worthwhile because you’ll be taxed more. Or you might be worried about the impact it’ll have on your tax code. Perhaps the whole ‘declaring’ side of things is just a little bit daunting.

The fact of the matter is, that even if you do need to declare your side earnings, the process isn’t as complicated as you might think.

But still worried? There’s actually a whole host of things you can do to make extra money, without declaring and paying any extra tax. At all.

Now don’t worry, I’m not suggesting some dodgy scam or tax avoidance scheme. I’m talking about what you actually don’t need to declare. Because believe it or not, you can make some additional income, without declaring it all!

Tax Free Side Hustles

Yep, you read that right. Some side hustles are completely tax free! So you don’t need to inform HMRC of them at all.

This means that your side hustle won’t interfere with your regular earnings and how they are taxed.

It also means you don’t have to worry about registering for self assessment or about submitting returns.

Of course there are rules and thresholds, but we’ll look at these as we go.

Matched Betting

I won’t go into detail about what matched betting is or how it works but it’s essentially leveraging bookmakers offers to make a profit.

As long as you understand what you are doing, it is risk free and the amount you can earn can be as little or as much as you decide.

If you have lots of time to put into it, and a big ‘bank’ then you can make decent money every month.

Don’t have much time to dedicate? You can still earn. But ultimately the rewards depends on the effort put it in.

So why is matched betting tax free?

Well, in the eyes of HMRC it is gambling. And gambling winnings are not subject to tax. So you can earn thousands if you like and it will not be taxable.

Selling Your Own Belongings

Now I have to make a distinct clarification here. If you are selling your old possessions then any income is not taxable.

However, if you buy products to sell at a profit then this is taxable.

So if you’ve had a wardrobe clear out and sold your old clothes on ebay – there’s no tax to pay.

If you’ve bought an item because you think you can sell it for more – then that is taxable.

Rent a Room Scheme

Got a spare bedroom? If you take on a lodger you can earn up to £7,500 a year tax free .

It’s not for everybody. But if you’re comfortable with having someone rent a room in your home, that’s up to £625 a month tax free income.

You can find out more about it here.

Trading Allowance

The trading allowance was introduced in the 2017/18 tax year.

It allows you to earn up to £1,000 a year tax free from self-employed income or ‘casual’ income.

This is in addition to your Personal Allowance. So if you make up to £1,000 a year from side income – you do not have to inform HMRC.

When you exceed this threshold, you will need to register for self assessment.

But for example, if you are just doing surveys and earning a few pounds a month, it’s unlikely you’ll exceed this amount.

Taxable Side Hustles

Basically anything that doesn’t fall into the above categories is taxable income.

The best thing to do is create a spreadsheet to record your earnings so that you can monitor when you’re nearing the £1,000 trading allowance threshold.

Some typical examples of side hustles you might consider:

  • Survey websites
  • Market research
  • Focus Groups
  • Mystery Shopping
  • Blogging
  • Freelance Writing
  • Selling on Etsy
  • Reselling on eBay

Other Tax FAQs

Are competition winnings taxable?

No, if you enter competitions any prizes you win are not subject to tax.

What about if I sell competition prizes?

Yes, in this instance that would become taxable income

What about websites that pay in vouchers?

You’ll find that some survey and market research websites reward you in vouchers.

There is a lot of conflicting advice online about this.

I have queried with HMRC myself and their stance was that if vouchers are the only option and there is no cash alternative, then it is NOT taxable income.

However if a website pays in vouchers, but you also have the option of BACs/Paypal/Cheque – even if you opt for vouchers, this will be taxable income.

PLEASE if you are worried or unsure contact HMRC for advice.

Disclaimer: I am not a tax expert or financial advisor. This post should be used for guidance only. Always do your own research and if you have any concerns, address them directly with HMRC. It’s always better to err on the side of caution where tax is concerned.



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